I'm making a teddy bear and the pattern calls for 3mm needles for the bear and 2 3/4 mm needles for the nose.

I've looked in a couple of craft stores as well as online and the smallest I can find is 3.25 mm. Most of these are double pointed needles, which isn't want I want/need. The local craft store I've been to only carried the 3.25 needles in a brand that I really hate (I had a problem I posted here in the past where the needles oxidized and stained my yarn). They also carry wooden needles, but the smallest in that size I believe is a 4.5 mm.

There is a local yarn store that I can look at, but I'm not sure if she carries needles or only yarn.

Any ideas? I assume that the needles need to be small so that the stitches are tighter and the stuffing doesn't show - am I correct in that assumption? The nose is decorative and sewn on later so I can use whatever size needles I choose for that, but I don't want to knit a whole bear just to realize I should have used smaller needles!

Most local yarn shops have a wide variety of needlels, including smaller ones, so call or drop in to check it out. Yeah, the tighter gauge on smaller needles is to keep the stuffing from showing. You might be able to use the 3.25 and a little heavier yarn, but it'll make a larger bear.

Yes, the local yarn store is a good place to try. Online, Knit Picks has a good selection of circulars in the small sizes in a variety of types. The straights are harder to come by if that's your preference. You can use the circulars though to knit back and forth and in many ways they're easier to work with than straight needles.

Hiya Hiya makes needles as small as US 00000000 (that's eight zeroes!). There are probably several online outlets that carry them, but I know you can get them from yarnmarket.com.

(...clickity-clickity...)

Yup. They have them in both the 3mm (US 2.5) and 2.75mm (US 2) sizes. They're stainless steel circulars in just about any length you could ever want. I've got some (in much larger sizes) and love them.

On the stuffing leaking out, another tip I read somewhere (might've been here actually) was to use a pair of panty hose to line your toys with. Keeps the stuffing inside where it belongs. I should hasten to add that I've never actually done this, so I can't testify to its efficacy. Also, I find that I tend to cram more stuffing into toys than they actually need. Avoiding this will also help keep the stuffing on the inside where it belongs.

I found a set of sock needles at I think Fred Meyer, it's a set of aluminum DPNs in small sizes and ordered another set of smaller ones from JoAnn. DPNs may or may not be something you'd normally buy but if you could find them they might hold you over till you find what you want.

__________________~ GG
Happiness is catching that dropped stitch while it's still fixable..